2
of these factors supports approval, with more detail provided in the rest of the comment.
● The effect of the proposed business combination on competition (“competition
prong”);
o Credit Cards - The US credit card market is already highly concentrated, with
indicators of a lack of price competition among the largest credit card companies.
Capital One in particular is already one of the most expensive options for customers
of all credit types. Analysis of this merger should also focus on how this will affect
competition in the non-prime credit card market, as these borrowers have fewer
options, and preliminary analysis suggests that combining Capital One and
Discover’s market share of outstanding non-prime credit card debt results in a
presumption that this is an anti-competitive merger.
o Debit Cards and Interchange Fees - Capital One wants this merger because it would
exempt them from regulatory caps on fees charged to merchants when they use
debit cards to make purchases. If approved, Capital One would have the ability, and
incentive, to raise fees.
o Unlikely to Compete with Visa and Mastercard - Previous credit card mergers have
not resulted in benefits to consumers. In addition, this merger may actually increase
Visa’s dominance of the credit card market and start a wave of payment network
mergers.
● The financial and managerial resources and future prospects of the existing or
proposed institutions (“safety and soundness prong”);
o Financial Resources - Capital One’s concentration in non-prime credit card and
auto lending, combined with rising delinquency rates in both these sectors, raise
serious concerns about Capital One’s ability to withstand an economic downturn.
o Managerial Resources - Capital One’s repeat violations of antitrust, banking,
consumer, and discrimination laws indicate significant compliance deficiencies and
suggest that Capital One is already too-big-to-manage at its current size, and may
even be too-big-to-care about complying with federal and state laws.
● The probable effects of the business combination on the convenience and needs of the
community served (“convenience and needs prong”);
o Capital One says it will implement a community benefits plan, but they have not
lived up to similar claims in the past. In 2012 Capital One made a $180 billion
commitment related to their merger with ING Direct that included a $28.5 billion
commitment to mortgage lending. However, Capital One did not deliver on this
commitment and exited mortgage lending in 2017. Banks cannot continue to meet
the convenience and needs prong of merger review with empty promises that are
not monitored or enforced after the merger is completed. Capital One’s predatory
business practices also cast doubt on their ability to serve the needs of borrowers
with lower credit scores.